Stock Markets

The continued expectations of easing monetary policies across the globe buoyed stocks higher this week. After the Fed chairman’s testimony before Congress, the Dow Jones Industrial Average rallied to a new record high and closed above 27,000. Powell’s comments were clearly aimed at a more accommodative policy that strengthened expectations for a rate cut on the horizon. The European Central Bank (ECB) is also reiterating this sentiment and is considering injecting fresh stimulus to the economy via interest-rate cuts, or the possibly quantitative easing. As the second-quarter earnings season kicks off next week, attention will shift from central banks moves to earnings, which analysts believe may increase volatility.

U.S. Economy

The U.S. economic expansion seems set to continue in good stead. In his words to Congress this week, Chair Powell characterized the economy as “in a good place.” Many endorse the fact that our current economic expansion has endured largely because of moderate pacing of economic growth. The economy’s steady pacing is supported by solid consumer spending, which composes 70% of economic growth. Based on strong unemployment, modest wage growth, and low interest rates, consumers are expected to maintain the current positive trend. As always, there are risks to this optimistic outlook:

• Too low of inflation

Inflation running either too high or too low is a negative. In the current climate the more immediate risk to the bull market is too low inflation more commonly called deflation. The risk here is that deflation could trigger a recession. The Fed has shown its willingness to cut short-term interest rates to correct this.

• U.S.- China trade tensions

Trade tensions between the U.S. and China are a major factor with the potential to slow global growth by dampening business investment and disrupting supply chains. According to OECD (Organization for Economic Co-operation and Development), world trade growth for 2019 has fallen to 2.1% in 2019 from 3.9% in 2018. Trade tensions play a major role.

• Slowing global growth

While trade tensions are currently stealing headlines, other global concerns can be worrisome. These are based around geopolitical uncertainties such as Brexit, burgeoning Italian debt, and a slowing Chinese economy. All these factors have contributed to a slowing of global growth. Based on current trends, analysts expect global economic growth to slow over 2019.

Metals and Mining

The gold market had solid gains for the week with prices holding above critical psychological level at $1,400 an ounce. Gold also benefited from Fed Reserve Chair Jerome Powell’s comments before Congress, which indicated a rate cut on July 31. A softer US dollar, geopolitical issues and a slow in economic growth were the main drivers behind the precious metal’s ability to trend between US$1,270 and US$1,420 per ounce throughout the quarter. August gold futures last traded at $1,418.60 an ounce, up more than 1% since last Friday. Next week will test endurance for gold bulls, as they wait to see if prices can hold above $1,400 an ounce in what should be a relatively uneventful week.

Silver made slight gains of 1.26 percent over the second quarter of this year which just came to a close. The white metal was somewhat stagnant throughout the period, but on a positive sentiment note, it reached its highest level towards the end of June.

Energy and Oil

Global oil demand continues to soften, which analysts say could result in a supply surplus in the second half of this year. The EIA downgraded its forecast for global oil demand growth to just 1.1 million barrels per day (mb/d) this year, down from the 1.2 mb/d the agency forecasted last month and from 1.4 mb/d in May in its latest Short-Term Energy Outlook. They say that the “increasingly weak outlook” for demand could upend global balances. A slowing economic picture now means that inventories could actually increase by 0.1 mb/d. So, even with the OPEC+ cuts extended, the oil market could remain in a state of surplus throughout this year and next.

Natural gas spot prices rose at most locations this week. Henry Hub spot prices rose from $2.24 per million British thermal units (MMBtu) last Wednesday to $2.46/MMBtu Friday.  At the New York Mercantile Exchange (Nymex), the price of the August 2019 contract increased 15¢, from $2.29/MMBtu last Wednesday to $2.444/MMBtu Friday. According to Baker Hughes, for the week ending Tuesday, July 2, the natural gas rig count increased by 1 to a total 174. The number of oil-directed rigs fell by 5 to a total of 788. The total rig count decreased by 4, and it now stands at 963.

World Markets

Stock markets in Europe fell even as continued signs that both the Fed and the European Central Bank (ECB) are endorsing further stimulus measures. The pan-European STOXX Europe 600, the UK’s FTSE 100 Index, the German DAX index, and France’s CAC 40 Index fell as trade tensions expanded to a U.S. and France dust up. The European Commission cut its eurozone growth and inflation estimates citing the fact U.S. trade policy could pose a risk to the group. The commission lowered its inflation rate increase expectation, which it believes will be further from the ECB’s target of close to, but less than 2% over all.

Stocks in China recorded a weekly loss, likely as the U.S. trade policy’s impact on China’s economy sunk in. The benchmark Shanghai Composite Index fell 2.67%, and the large-cap CSI 300 Index, gave up 2.16%. China reported that export growth in June slowed 1.3% from a year ago, while imports fell a bigger-than-expected 7.3% from the prior-year period.

Even as a temporary halt in the trade battle was reached between the U.S and China, analysts believe that the differences between the two countries are complex and are not easy to resolve. This leaves the risk of increased tariffs and other forms of retaliation to potentially escalate quickly if negotiations break down.

The Week Ahead

This week kicks off the second-quarter earnings season when about 10% of S&P 500 companies report earnings all week long. Key economic data coming this week include retail sales, industrial production numbers, housing starts, and the index of leading economic indicators report, along with consumer sentiment released Friday.

Key Topics to Watch

–           First S&P companies reporting

–           June retail sales report

–           June industrial production numbers

–           NAHB homebuilders index released

–           Leading economic indicators report

–           Consumer sentiment

Markets Index Wrap Up

Stock Markets

Stocks managed to extend their recent gains, even with a shortened holiday week; the S&P 500 closed near its record high. All investors felt relief after the U.S. and China agreed to suspend new tariffs and resume negotiations with no specifics. While that was the expected course, the fact that the leaders were able to avoid further escalation of trade tensions and move away from heightened tensions was still viewed as very positive. Another positive emerged as 10-year government bond yields fell to their lowest levels in more than two years based on signs of slower U.S. growth and expectations of additional easing by the central bank.

U.S. stocks may have been the beacon that is leading the way, however international equities are also up double-digits this year, as well as small-cap stocks. Analysts suggest that as the cycle advances, well-diversified portfolios will be better positioned to navigate the swings and keep investors on track toward positive momentum. 

U.S. Economy

Markets seem convinced that there is room for 2019 to continue to its end with a positive outlook. But they caution that there’s more bumps in the road ahead. The first half of the year’s highs in stocks and low interest rates, combined with last week’s data provide key takeaways: last week’s employment report showed that the U.S. economy added 224,000 new jobs in June, the strongest month this year and solidly above the 161,000 average so far in 2019. Monthly payroll gains averaged 223,000 for all of 2018, so the current slowdown in hiring raises fears that the U.S. economy is heading toward recession. The Fed’s apparent willingness to consider rate cuts in an effort to extend the economic expansion lends strong support.

The S&P 500 rose by a strong 17.4% (18.5% including dividends) in the first six months of 2019. Again, that’s the single best first half year since 1997. There has been a total of 10 years during the last 60 when the stock market returned more than 15% in the first half. For a full seven of those 10 years (70%), the market also posted a positive return in the second half of the year. The stock market finished positive for the full year in all 10 of those years averaging a 27% return. 

Metals and Mining

Gold investors have to be enjoying this run as gold remains one of the strongest precious metals and continues on track for its seventh straight week of gains. As the week ended,

gold dipped over 1 percent on Friday, precipitated by the US dollar strengthening ahead of the release of US jobs data.

Analysts say they see the dollar a tad stronger and the euro weak, which usually holds gold back. Unfortunately, the readiness to push prices higher by speculators is also pretty limited.

Silver was down over 1 percent on Friday but could make a rebound based on indications that the Fed will cut interest rates later this month. Market watchers seem to remain positive about the silver, despite its current relatively stagnant nature. Analysts forecast that the silver price will average US$16.20 per ounce in Q4 of this year before rising to an average of US$17 in the fourth quarter of 2020. The other precious metals were mixed with platinum down nearly 2 percent for the week and palladium tracking as the only precious metal to make gains early in the session on Friday, ticking up 0.06 percent. As of 9:00 a.m. EDT, the metal headed for its fifth straight week of gains, trading at US$1,557 per ounce.

Energy and Oil

OPEC and allies gathered this week in what most felt was one of the least heated meetings in recent years, rolling over their production cuts into March 2020. This send signals that the oil market is still over supplied, and demand growth looks weaker for the balance of 2019.

If successful, OPEC’s mission to draw down excess inventories would lead to higher oil prices. Its cartel members need this action to balance their budgets, which are overly reliant on oil exports.

At the same time, higher oil prices are helping U.S. shale production to continue growing which is directly offsetting a lot of supply that OPEC is withholding from the market. OPEC and its Russia-led non-OPEC partners in the production cut deal are focused on reducing inventories and boosting prices. OPEC’s ‘free pass’ to U.S. shale is not expected to last long, according to JP Morgan. The cartel and its largest producer, Saudi Arabia will reclaim market share from U.S. shale, JP Morgan’s head of EMEA oil and gas research Christyan Malek reported to the media this week. 

Natural gas spot prices fell at most locations this week. Henry Hub spot prices fell from $2.36 per million British thermal units last Wednesday to $2.32/MMBtu Friday. At the New York Mercantile Exchange, the July 2019 contract expired Friday at $2.291/MMBtu, up 2¢/MMBtu from last Wednesday. The August 2019 contract remained unchanged Wednesday to Wednesday at $2.268/MMBtu.

World Markets

The pan-European STOXX Europe 600 Index, the UK’s FTSE 100 Index, and exporter-heavy German DAX index all rose throughout the week surrounded by increased hopes that the European Central Bank (ECB) will continue to provide monetary stimulus to keep the region’s economies moving forward. Both stocks and bonds got a bump after International Monetary Fund (IMF) Managing Director Christine Lagarde was nominated to be the next ECB president. Markets believe that she will continue the monetary policy established by current President Mario Draghi.

In Germany, data punctuated the cost that trade tensions mixed with slowing global growth have had on its export-dependent economy. German industrial orders were reported lower in all sectors, dropping 2.2% in May and for a total of 8.6% for the year. Overall, this is sharpest year-on-year drop of industrial orders since 2009.

Chinese stocks posted a weekly gain as a reaction of relief to a temporary cease-fire on tariffs struck by President Trump and Chinese leader Xi Jinping last week. The absence of any further specifics about when or how resumption will take place tempered optimism about long term solutions. The benchmark Shanghai Composite Index added 1.1%, and the large-cap CSI 300 Index, gained 1.8%. Chinese stocks rose immediately after Trump and Xi met at the G20 summit in Japan and agreed to restart talks alongside the U.S. suspending any new tariffs on Chinese goods.

The Week Ahead

It’s a relatively quiet week on reports with a few important indicators coming out including the NFIB small business index report on Tuesday, FOMC meeting minutes released on Wednesday and inflation plus weekly jobless claims reported on Thursday. The producer price index will also come out this week.

Key Topics to Watch

–           May consumer credit report

–           NFIB small business index report

–           FOMC meeting minutes released

–           Inflation numbers issued

–           Weekly jobless claims report Thursday

–           Producer price index

Markets Index Wrap Up

Stock Markets

Stocks finished mixed this week as markets took in the strong gains from the month of June. Investors were in a wait-and-see mode anticipating Friday’s G20 Summit in Japan. The big takeaway would be a trade truce and resumption of negotiations between the U.S. and China, which stalled last month. The week also marked the end the quarter and the first half of 2019. At the year’s midpoint, we reached an important milestone: the 10-year anniversary of the current economic expansion. Of course, some volatility crept in during the second quarter 2019, but the markets remained strong with rising bonds and stocks adding to gains. While this expansion might be the longest, analysts still believe that there is room to run for some time.

Two large mergers of note happened this week. Eldorado Resorts says it will acquire Caesars Entertainment in a deal worth about $17 billion, making the pair the largest U.S. gaming company. Drug maker AbbVie has agreed to acquire rival Allergan for around $63 billion in cash and stock.

U.S. Economy

As we end the 2nd quarter, the current U.S. economic expansion logs in as the longest-running one on record, going back to 2009 and surpassing the 1991-2001 expansion. Obviously, the quality and characteristics of the economy have evolved over time, but can this expansion continue even further? Most analysts are in agreement that it can, but they caution that they don’t believe the next stage will look the same as this current phase. Expansions have typically finished with the end of a bubble, such as housing or tech, from an external shock or based on poorly conceived monetary policies. None of these are at play at the moment. The good news for investors is that bull markets rarely end without an accompanying recession. This expansion is by most estimates performing well enough continue to offer support to the stock market going forward.

Metals and Mining

Gold has been on a tear this month and now gold markets are testing if the precious metal can hold support above $1,400. There is continued and persistent selling pressure after hitting its six-year high this week.

Market sentiment is clearly bullish as prices pushed to a six-year high, but by week’s end, sentiment took a more reserved stance since analysts are questioning aggressive expectations for lower U.S. interest rates that came out of last week’s Fed meeting. Gold’s gains have also been largely supported by expectations of an interest rate cut in July by the Federal Reserve.

So, although Gold is off its highs, it is still experiencing its best month in three years. Gold prices are up almost 1% for the week and up nearly 8% for the month. Silver was also on track for a monthly gain, but then moved down slightly on Friday. As of 12:30 p.m. EDT, silver was trading at US$15.25 per ounce. The other precious metals remain strong, with platinum inching up to US$838 per ounce and palladium closing out the week US$1,518.50 per ounce.

Energy and Oil

Oil prices moved higher at the end of this week, like other markets anticipating the meeting between Donald Trump and Xi Jingping. The sentiment is of course that talks could result in a breakthrough in trade negotiations, an agreement to resume talks, or a collapse and subsequent increase in tariffs. All of these will affect oil prices. OPEC kicks off its meeting in Vienna on Monday. Market bulls will be hoping that the G20 summit will provide a trade breakthrough while the supply side of oil continues to show bullish signals, according to market insiders.

Natural gas spot prices fell at most locations this report week. Henry Hub spot prices fell from $2.36 per million British thermal units (MMBtu) last Wednesday to $2.32/MMBtu yesterday. According to data from PointLogic Energy, total U.S. consumption of natural gas rose by 4% compared with the previous week. Natural gas consumed for power generation climbed by 8% week over week based on slightly warmer than normal temperatures in the US southeast.

European governments are reported to be “doubling down” on efforts to keep economic ties with Iran, in an effort to keep their nuclear deal alive. The EU has tried to develop a financing mechanism to bypass U.S. sanctions, but most foreign companies are unwilling to do business in Iran under the current heated climate.

World Markets

The pan-European STOXX Europe 600 Index, the UK’s FTSE 100 Index, and the exporter-heavy German DAX Index all rose slightly throughout the week based on expectations that the Group of 20 summit would help ease global trade tensions. One soft spot was the yield on the 10-year German bond, which fell to -0.34% as European economic indicators were disappointing.

Chinese stocks were off slightly for the week as traders were moving cautiously in advance of a much-anticipated meeting between President Trump and his Chinese leader Xi Jinping at the G20 summit. The benchmark Shanghai Composite Index declined 0.8% and the large-cap CSI 300 Index lost 0.2%. However, for the month of June both indexes rose off of positive signals on trade earlier in the month. The Shanghai benchmark rose 2.8% and the CSI 300 Index gained 5.4% in June based on optimistic investors expecting the G20 meeting between both leaders would, at least lead to the resumption of trade talks that halted last month.

The Week Ahead

It’s a shortened week for U.S. financial markets with banks and markets closed on Thursday for the U.S Independence Day holiday. Canada will close its banks and markets on Monday for their Independence Day celebrated July 1st. Major economic news includes the ISM manufacturing Purchasing Managers’ Index, May factory order numbers, auto sales reported on Tuesday and June’s jobs report released on Friday.

Key Topics to Watch

–           Post G20 summit trade news

–           ADP employment report

–           ISM nonmanufacturing index report

–           May Factory orders report

–           Nonfarm payrolls June report

–           June unemployment rate report

–           Gold pricing post G20

Markets Index Wrap Up

Stock Markets

This is the third straight week that U.S. stocks finished higher. Both the S&P 500 and the Dow closed at new record highs. The clear driver for the for the rally in both bonds and stocks was the Federal Reserve releasing news that it is open to rate cuts this year – possibly as early as next month. The committee dropped its statement about being patient in setting rates, which had signaled it would hold rates steady for some time. Instead, it now states it will act as appropriate to sustain the economic expansion. Following the financial crisis of 2008, the U.S. stock market first achieved a new record high in 2013. It has now set 225 all-time highs, validating the fact that new highs can’t be viewed as a single indicator of exhaustion. It’s important to note that periodic dips in the market provide a good opportunity for long-term investors to expand diversity in their portfolios by adding high-quality assets at lower prices.

U.S. Economy

In the first quarter, the U.S. economy grew at a solid 3.1%, but showed some signs of weakness. Consumer spending dropped to half its average rate and when combined with a lackluster jobs report and slowing wage gains set the stage for potential slowdown. This week though, the Fed demonstrated to the markets its willingness to cut rates in order to head off rising risks from deflation, trade threats and a slowing global economy.  Markets reacted swiftly as the U.S. 10-year Treasury yields dropped to 2.0%, but rebounded to 2.06%. U.S. rates are low but still higher than most developed countries. So, it is likely that foreign demand for U.S. Treasuries will help keep long-term rates low and analysts expect it to prolong the bull market by providing inexpensive credit to businesses and consumers.

Metals and Mining

It looks like the patience of gold bulls has finally paid off. This week, demand for the precious metal managed to drive prices to levels we have not touched on in nearly six years. Gold climbed 2 percent on Friday morning (June 21), rising above US$1,400 per ounce to reach as high as US$1,410.78 at one point. The driver for the surge is obviously the Fed delivering its dovish opinion that the market was seeking. Essentially this has removed the ‘patience’ approach to cutting rates,” that the Fed has echoed all year. Some analysts feel gold’s major breakout could be just the start of a long-awaited rally as investors strongly expect a shifting interest rate based on a cut that could come as early as next month. Gold saw most of its gains this week following the Federal Reserve’s monetary policy meeting.

Silver followed gold’s lead once again proceeding the Fed announcement, but in the end gave up 1.2 percent of its gains. In the other precious metals group, platinum was down nearly 2 percent for the week. On Friday morning, the metal was trading at US$799 per ounce. Like the others, palladium rallied up 1.43 percent for the week, but edged down just over 1 percent on Friday. As of 9:43 a.m. EDT, palladium was trading at US$1,487 per ounce, still higher than gold.

Energy and Oil

Oil prices spiked up about 5 percent on Thursday as the U.S. announced out was considering a military strike against Iran. The U.S. military seemed poised to carry out a strike late Thursday, but the operation was called off by President Trump at the last minute. Reuters reported that Trump may have relayed a message to Iran that he was seeking to open negotiations. Friday morning Trump tweeted that he called off the strike because it would not be proportional to the shooting down of an unmanned drone. His tweet reads “I am in no hurry, our Military is rebuilt, new, and ready to go, by far the best in the world. Sanctions are biting & more added last night. Iran can NEVER have Nuclear Weapons, not against the USA, and not against the WORLD!,”.

Still, this had the whole region on alert. Iranian sources told media that the Supreme Leader was opposed to negotiations. They also said that any attack would have regional and international consequences. As the week closed oil prices were set for their largest weekly gain since February. Natural gas spot price movements were mixed this report week. Henry Hub spot prices remained flat at $2.36 per million British thermal units. At the New York Mercantile Exchange, the price of the July 2019 contract decreased 11¢, from $2.386/MMBtu last Wednesday to $2.276/MMBtu Friday. The price of the 12-month strip averaging July 2019 through June 2020 futures contracts declined 9¢/MMBtu to $2.442/MMBtu.

World Markets

Equity markets rose this week on expectations of added stimulus. European stocks rose, mostly fueled by anticipation of more central bank stimulus measures. The pan-European STOXX Europe 600 Index, UK’s FTSE 100 Index, the exporter-heavy German DAX index, and Italy’s FTSE MIB Index all gained. This followed an announcement by ECB President Mario Draghi that the bank could offer more stimulus measures as early as July. Draghi’s comments came prior the Federal Reserve’s commitment that it is ready to cut rates if the U.S. economic outlook does not improve.

The euro fell about 1% against the U.S. dollar on the week while the yield on 10-year German government bonds fell to a new all-time low of -0.315%, and the yield on the French 10-year bond hit 0%, its lowest level ever. The British pound rose almost 1% against the U.S. dollar, in part led by the Bank of England’s (BoE) decision to hold short-term rates steady at 0.75%.

With positive momentum across all markets, the Chinese stocks advanced for the week. Traders are betting that a meeting between U.S. President Trump and his Chinese counterpart Xi Jinping at this week’s G20 meeting in Japan would put the two countries back at the trade table, which halted last month. The benchmark Shanghai Composite Index gained 4.2% and the large-cap CSI 300 Index, added 4.9%. Both indexes recorded their largest weekly gains since the week ended April 5, according to Reuters.

Sentiment toward Chinese stocks also picked up after the Fed left its key rate unchanged and signaled that it was ready to lower short-term interest rates for the first time since 2008.

The Week Ahead

Important economic news to come out this week ranges from consumer confidence to global influence. The Conference Board’s consumer confidence report comes out on Tuesday followed by the important durable goods orders numbers on Wednesday. To cap off the week, the University of Michigan issues its sentiment report on Friday. The very important G20 Leader’s Summit kicks off in Japan beginning Friday. President Trump and Chinese leader Xi have said they will to meet separately in a session aimed at resolving important issues hanging up trade negotiations between the two global powers. The outcome will certainly send messages to global markets.

Key Topics to Watch

–           US – Iran military tensions

–           G20 Leader’s Summit

–           Conference Board Consumer Confidence Report

–           U of M sentiment report

–           Durable goods orders report

–           Gold entering new territory

Markets Index Wrap Up

Stock Markets

The week was pretty quiet with stocks edging higher and in a bright spot, small-cap companies outperforming. There were a number of high-profile mergers that lifted investors’ confidence this week, but indexes gave back some gains on Friday, likely due to chipmaker Broadcom’s announcement that the U.S./China trade tensions are suppressing demand. On Thursday, following attacks on two tankers near the Persian Gulf, oil attempted a brief rally, but finished out lower pressured by worries about sinking global demand for oil. Retail sales reports showed a rebound in U.S. consumer spending in May that followed a relatively slow first quarter. This is solid evidence that consumers are still well-positioned. In a snapshot, all major indexes have rebounded to near all-time highs – a very positive outlook with some expectations of higher volatility by analysts.

U.S. Economy

The real driver in the 10-year U.S. economic expansion is consumer spending. In fact, it accounts for a full two-thirds of overall GDP. Consumption spending averaged 2.6% growth in 2018 and then fell to half that rate for the first three months of 2019. That’s because seemingly strong GDP was propped up by temporary factors like inventories and imports. The release of the lackluster May jobs report and slowing wage gains last week compounded concern that consumer spending might be weaker than analysts thought.

That is why this week’s retail sales numbers are being closely monitored as an indicator of consumer health and market strength. In the end, it was very good news, with May retail sales stronger than expected. That was followed by news that the previous months’ retail figures were revised higher. So, all told, retail sales suggest that consumer spending rebounded in the second quarter to a healthy 3.5%. That’s even higher than in 2018.

Tariff Concerns Linger

The ongoing elevated trade tensions between the U.S. and China have added to market concerns that economic growth could be slowed due to increasing tariffs. A clear indication of the sentiment followed news of progress towards a trade deal earlier this year, which triggered a rally in share prices. With negotiations between the U.S. and China at a kind of impasse, it seems that trade tensions are taking a toll on both countries. China’s industrial production sank to 17-year lows in May, and U.S. industrial production has also suffered in recent months, while it did manage to rebound marginally in May. 

Metals and Mining

Precious metals were fueled by ongoing trade war concerns this week between the US and China, alongside some wavering global equities.

Gold was flat on Friday after making gains in the previous session. That was pushed by the US dollar dropping from the two-year peak it hit on Wednesday and global equities declining due to increased China-US trade tensions.

Sentiment is turning bullish for gold as prices broke through critical resistance, pushing to their highest level since early-April 2018. Analysts are warning that gold could face a short-term setback this week after the Federal Reserve’s monetary policy meeting.

Gold’s continued four-week rally is seen as a result of aggressive market signals that the Federal Reserve will loosen monetary policy with a first cut coming in July. According to the contrarians, the market’s fortunes could shift if the Fed doesn’t meet the market’s expectations.

Silver followed gold’s lead on Friday and dipped slightly after climbing over 1 percent in the previous session. Industry experts still believe in the silver’s potential, however. Firms polled in a key report from FocusEconomics echoed that silver could reach as high as US$17.80 per ounce by end of year. Platinum made small gains on Friday after reaching its lowest level since February and stayed on track for its fifth straight weekly loss. Palladium made the most gains on Friday, ticking up over 1 percent and once again entering into US$1,300 per ounce territory.

Energy and Oil

The big energy news was oil prices surging early Thursday after two oil tankers were reported to have been hit by explosions in the Gulf of Oman between Iran and the United Arab Emirates (UAE). That’s just one month after a previous incident in Middle Eastern waters. The U.S. has video proof, CENTCOM says, that Iran was behind the explosions that rocked the two tankers in the Gulf of Oman.

Immediately following the event, WTI Crude was surging 3.17% at $52.76, while Brent Crude was soaring 3.42% at $62.02. However, at week’s end, oil finished its stand lower forced back down by worries of lower global demand for oil.

On the natural gas front, mild weather and record U.S. natural gas production kept prices low despite low storage levels and high exports. On June 6, the price of the Henry Hub natural gas near-month futures contract at the New York Mercantile Exchange (NYMEX) closed at a three-year low of $2.324 per million MMBtu. That is its lowest price since May 31, 2016. Following on June 11, the spot price of natural gas at the Henry Hub closed at $2.34/MMBtu, the lowest price since November 17 according to Natural Gas Intelligence.

World Markets

As was widely expected, Mexican assets rallied early in the week in response to Mexico’s immigration-related agreement with the U.S., reached late last week in order to avoid new tariffs.

European stock markets ended the week slightly higher, pushed by the rise in oil prices that stemmed from the tanker incident in the Gulf of Oman. They are under pressure from U.S.-China trade tensions and weak industrial data coming out of China. The pan-European STOXX Europe 600, the UK’s FTSE 100 Index, the exporter-heavy German DAX index, and Italy’s FTSE MIB Index were all gainers.

Japan’s GDP figures were revised upward: for the quarter ended in March, Japan’s gross domestic product annualized growth rate was increased to 2.2%. That’s up from the 2.1% estimate a month ago. Sources in the Cabinet Office say this was due to upwardly revised capital spending data.

Chinese stocks rebounded as traders’ confidence increased that Beijing will make efforts to step up stimulus measures that could help cushion the economy from any impact from U.S. tariffs. The benchmark Shanghai Composite Index ended up 1.9%, an eight-week high. The large-cap CSI 300 Index, which tracks blue chips listed on the Shanghai and Shenzhen exchanges, added 2.5%. These gains come just one week after both indexes closed at their lowest levels in nearly four months.

The Week Ahead

There are a couple of key drivers that will light up the headlines this week in the markets: first and foremost is a rate decision from the Federal Reserve that comes out on Wednesday. Another important focus will be the U.S. housing data, which details housing starts and building permits in a report issued on Tuesday, with existing home sales released this coming Friday. Tensions are increasing in China and could see more unrest in Hong Kong, where protesters are planning more demonstrations.

Key Topics to Watch

–           Fed Rate released Friday

–           Gold moves based on fed rate indicators

–           Increased tension in China’s internal policies

–           U.S. housing starts report

–           U.S. home sales numbers issued Friday

Markets Index Wrap Up

Stock Markets

The S&P 500 rallied 4.4% as stocks finished higher for the best weekly gain in the last six months. However, bond yields declined to the lowest levels in nearly two years. Increased expectations of a Fed rate cut, positive response to the U.S. and Mexico reaching a resolution to avoid tariffs, and improved valuations, all helped stocks move higher.

In terms of economic data, signals were mixed with strength from the services sector mostly offset by weakness in the manufacturing sector. While job gains for the month of May came in below expectations, the unemployment rate is still very healthy at a 50-year low. Analysts expect a more balanced mix of positive and negative moves this season and feel confident about rising corporate profits, strong economic growth, combined with low interest rates creating a positive fundamental base that outweighs risks.

This also offers an opportunity to enhance diversification. Reviewers call for appropriate global stock-market allocations, with diversification across asset classes, including small- and mid-cap stocks, that will likely benefit from increased trade fears or renewed economic signals.

U.S Economy

There remains continued evidence of a slowdown in the U.S. economy, which in turn boosted hopes for a turn in Fed’s policy. Numbers from ADP showed that private sector payrolls had grown by the smallest monthly amount in over nine years for the month of May. Alongside that news, the Labor Department reported overall, payrolls had expanded by only 75,000 in May. The saving grace: May’s unemployment rate held steady at of 3.6%, its lowest in five decades. Almost immediately after the figures were issued, futures markets began pricing in over a 98% probability of a rate cut in 2019, which they say has a 90% chance taking place by July (source: CME Group data).

Economist suggest that ultimately, the determination of whether the economy continues to grow or falls into recession will be determined by the labor market and household spending. By most estimates, these are expected to remain healthy enough to support moderate GDP growth this year. This is heavily weighted in favor of the still-healthy labor market that is driving several key metrics.

Mexico On Hold

Expected tariffs planned to come into effect on June 10th were averted in a last-minute deal reached between the U.S. and Mexico. In a joint declaration released by the U.S. state department, the two countries said Mexico would take “unprecedented steps” to curb irregular migration and human trafficking.

The U.S. did not however, get one of its key demands that would have required Mexico to take in asylum seekers heading for the U.S. and process their claims on its own soil.

Mexico agreed to:

• Deploy up to 6,000 additional troops along Mexico’s southern border with Guatemala using its National Guard beginning Monday
• Take “decisive action” to tackle human smuggling networks

The US agreed to:

• Expand its program of sending asylum seekers back to Mexico while they await reviews of their claims.
• “work to accelerate” the adjudication process

Both countries have offered pledges to “strengthen bilateral co-operation” over border security, including what they have called “coordinated actions” and information sharing.

These actions, while not inferring a long-term solution, have arrested the immediate actions of the intended tariff going into place and offered some signs of confidence that the two parties can work out terms that will give the markets breathing room.

Metals and Mining

The precious metals markets were given a lift this week by geopolitical issues that continue to plague investors who then seek out the metals as safe havens. At the forefront was the gold market, which saw its best weekly performance in more than a year. Some leading analysts have predicted that the precious metal has enough momentum now to snap the critical long-term resistance barrier in the near-term. Lower U.S. employment growth helped push gold prices back to within close breaking distance of the all critical $1,350 level. During the week, August gold futures traded at $1,347.10 an ounce, up 2.7% compared to the previous Friday.

Gold faces some strong technical headwinds. Since hitting its 2015 low, it has tested resistance at or near $1,350 a total of eight times. Silver is taking some signals here, following gold’s lead on Friday. It added gains on the back of ongoing geopolitical concerns too, trading just under the US$15 per ounce level on track for its best week since late January. The others in the precious group were also up: platinum was up close to 1 percent for the week and on track for its first weekly gain in the last seven weeks. Palladium also climbed, edging up 1.05 percent for the week. As of 10:05 a.m. EDT Friday, palladium was trading at US$1,346 — a gain of close to US$20 from the previous week.

Energy and Oil

Once again, energy shares lagged, weighed down by continued weakness in oil prices, and the typically defensive utilities and real estate sectors also underperformed. Oil futures climbed for a second straight session Friday, with U.S. prices erasing their loss for the week just two days after dipping into a bear market. Natural gas spot prices fell at most locations this week. Henry Hub spot prices fell from $2.63 per million British thermal units (MMBtu) last Wednesday to $2.39/MMBtu. Temperatures were close to normal across much of the Lower 48 states, with warmer-than-normal temperatures in the Pacific Northwest and cooler-than-normal temperatures in the Southwest and Northeast. At the Chicago Citygate, prices decreased 22¢ from a high of $2.43/MMBtu last Wednesday to $2.21/MMBtu yesterday. Traders will be watching updates on a production-cut agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other major oil producers ahead of the deal’s expiration at the end of this month.

World Markets

European stocks rose as investors began pricing in expectations for rate cuts as both the U.S. Federal Reserve and the European Central Bank (ECB) indicated that they could possibly intervene if trade tensions hit the global economy. The pan-European STOXX Europe 600 Index and the UK’s FTSE 100 Index gained more than 2%. The exporter-heavy German DAX Index and Italy’s FTSE MIB Index both gained almost 3%. Germany, which leads European economies, reported that its Bundesbank data showed weak exports are taking a toll on the German economy and cut its economic output forecast to 0.6%, down from 1.6% in December. The central bank also slightly lowered forecasts for 2020 and 2021. Meanwhile, signs of China’s slowing economic growth continued to accumulate. Clearly this is raising hopes for stimulus from Beijing. The International Monetary Fund trimmed its 2019 growth forecast for China to 6.2% from a prior 6.3% estimate and projected 6.0% growth next year.

The Week Ahead

This coming week is a relatively light week for reporting, but some areas to focus on include inflation numbers to be released on Wednesday, along with May retail sales and consumer sentiment reported this coming Friday.

Key Topics to Watch

–           Mexican Tariffs relaxation

–           China Trade War changes based on Mexico

–           U.S. Retail Sales Report for May

–           U.S. inflation figures reported by the Fed

–           Gold to test the $1350 per ounce mark

Markets Index Wrap Up

Stock Markets

Stocks declined for the 4th straight week impacted by rising trade tensions and continued geopolitical uncertainty. With the White House announcing that the U.S. will impose tariffs on Mexico in order to quell illegal entry, concerns increased on unresolved U.S.-China trade issues. These have a serious impact on global growth. May showed the largest stock market pullback this year, but in counterpoint, bonds rallied significantly.  Overall, both the U.S. and global yields showed declines; the 10-year Treasury ended at its lowest point in 21 months at just 2.13%. German yields followed suit moving into negative territory.

U.S Economy

The leading US economic news surrounded the proposed tariffs on all imports from Mexico in a bid to force Mexico to deal with its illegal immigration problem. It’s hard to tell if higher tariffs on China and Mexico are short-term tactics aiming to spur on specific actions, or they are more long-term strategies that could stay in place after any goal is achieved. Both of those things have occurred in past tariff bouts. Higher tariffs on U.S. imports generally lead to higher prices in the U.S. and slower economic growth for the countries involved. But the impacts are also typically small when compared to the overall U.S. economy. Most analyst are still looking at economic growth to continue at 2% to 2.5% in 2019. That’s thanks to strong job numbers, slowly rising wages, low inflation, low interest rates and aggressive fiscal policy.

Tariffs on Mexican Imports

The surprise tariff increase on Mexican imports is a 5% tariff slated to begin June 10 and to increase monthly to cap at 25%. The plan is to pressure Mexico over its inaction in dealing with stopping illegal immigration flows to the U.S. Leading imports from Mexico include autos and electronics, with the overall import figure at about $350 billion. Stocks in the leading sectors declined in response. It’s hard to tell if these tariffs will prompt a response from Mexico, but most analysts don’t expect tariffs to rise to 25% on imports from Mexico. However, ongoing threats of higher tariffs and trade disruptions are expected to add to stock market volatility.

Metals and Mining

The gold market is living up to its potential as a safe-haven asset this week with prices pushing back above $1,300 an ounce. Gold is seen as attractive because it is considered one of the cheapest safe-haven assets out of all the financial markets. The U.S. dollar index has struggled to hold gains above 98 points, but it continues to trade near a two-year high. Meanwhile, the U.S. 10-year bond yields are trading at around 2.16%. The inverse is true for gold, which is trading at a two-week high. The August gold futures last traded at $1,309.20 an ounce. That is up over 1% from last week. Geopolitical tensions always come to bear on the metals markets, and especially gold. Some analysts think they have reached a tipping point with President Donald Trump adding a 5% tariff on Mexico in his efforts to halt illegal immigration into the U.S.

Energy and Oil

U.S. oil futures dropped by more than 5% on Friday to settle at their lowest since February as another market saw affects of the Trump administration’s plans for tariffs on Mexican goods. The concern is that the tariffs may affect economic growth and therefore, energy demand. Overall, energy shares performed worst for the second consecutive week as domestic oil prices tumbled to their lowest level since February. The prices were dragged lower by a smaller-than-expected decline in U.S. crude inventories. In a move not widely reported, the Trump administration has decided to approve expanded use of ethanol fuel. That is expected to help corn farmers hurt by the trade conflict with China. According to data from PointLogic Energy, the average total supply of natural gas rose by 1% compared with the previous week. Dry natural gas production grew by 1% compared with the previous report. Average net imports from Canada were down 2% from last week.

World Markets

This week, both the U.S.-China trade tensions and President Trump’s new plan to impose tariffs on Mexico pushed equity markets in Europe down as investors moved to lessen risk. The pan-European STOXX Europe 600 fell about 2%, the UK’s FTSE 100 lost about 1.6%, and the export-heavy German DAX index dropped 2.4%. Tensions are increasing in Italy between the euroskeptic government and the European Union (EU). As a sign, the FTSE MIB Index lost almost 3%. Investors sold Italian government debt likely due to growing fears of a showdown between Rome and Brussels over Italy’s high debt levels. Over the week, the benchmark Shanghai Composite Index added 1.6%, and the large-cap CSI 300 Index added just under 1%. The CSI 300 is notable as it tracks all bluechip stocks listed on the Shanghai and Shenzhen exchanges.

The Week Ahead

There’s plenty of economic data to watch this week: the Manufacturing Purchasing Managers’ Index comes out, along with auto sales and construction spending from the month of May. A bigger factor will be May’s jobs report, which will be released this week, with most market watchers and economist expecting the unemployment rate to stay right in line with the cyclical lows.

Key Topics to Watch

• Mexican Tariffs by the US
• China Trade War with the US
• ADP National Employment Report
• U.S. International Trade in Goods & Services Report
• ISM Manufacturing Report on Business
• Revised Productivity & Costs

Markets Index Wrap Up

Walking into any concert venue, sports arena, or secure government building today, and the first thing you now must do is empty your pockets and walk through a metal detector. Thanks to a rise in mass shootings and terror alert levels, this clumsy and cumbersome process has slowly become the new normal for any entry into a busy place.

However, this era of slow security entry may finally be coming to an end, as the future of security could soon merely involve a casual stroll through a gate that safely and swiftly scans waves of people in real time.

Meet HEXWAVE^TM from Liberty Defense Technologies – a brand new threat detection technology developed at MIT that uses real-time Active 3D Image processing to detect metallic and non-metallic threat objects and location, such as a gun, or guns, carried near a school or place of worship prior to the criminal even entering the building. The detection system, can now be as overt as a typical screening gateway, or covert as installing devices into the walls or other hidden fixtures on the way into the venue.

“What we’re targeting is the urban security market,” said Bill Riker, CEO of Liberty Defense in an interview with WIRED. 

Developed to provide a key part of a layered threat detection defense  Liberty Defense is looking beyond airports to other scenarios where people need to be scanned quickly and unobtrusively—such as concerts, sporting events, and large outdoor gatherings.

Upon detection, the system can tie into security infrastructure to instantly begin setting off alarms, locking doors and putting people inside on alert to enhance safety in a scenario where every second counts.

“What we’re offering is an attack prevention system,” said Liberty Defense COO and President of US Operations, Aman Bhardwaj, in an interview with Forbes. “We’re preventing someone with a weapon from entering.”

Speed + Stealth = Safety

The Liberty Defense Technologies HEXWAVE^TM system is the racing to become the security protection of the future—and it couldn’t come soon enough.

Since 2015 there have been over 1,700 mass shootings in the USA, with an average of over 350 shootings happening per year. In high-traffic scenarios, dense gatherings of people are soft targets. Currently there are no means to counter threats beyond entry point solutions, which have limitations in terms of a combined criteria for accuracy, throughput and even location around or within the perimeter of a facility.

Beyond just sporting events and concerts, places like hotels, schools, and places of worship tend to have a lot of patrons always entering and exiting.

A system such as HEXWAVE^TM might have prevented a scenario such as the Las Vegas shooter successfully bringing a cache of weapons up to his room, veiled under common luggage pieces. HEXWAVE^TM is designed to discreetly spot metallic and non-metallic objects of interest, such as guns or other weaponry.

Tourism in Las Vegas took a noticeable hit in the aftermath of the shooting atrocity. Hotels have been forced to look at new methods to protect their patrons, while refraining from installing obtrusive gate of entry checkpoints that would further add to the feeling of uneasiness left after the horrible event.

Where HEXWAVE^TM aims to help such venues, is to utilize discreet hidden sensors amid entry points, that could perhaps be hidden behind posters, in hotel furniture or in the light fixture—allowing people to be scanned unaware. Through communication from the sensors to central controls, a tripped alarm could alert police or local security officers, while giving its clients instant notification in order to act accordingly, based on the information provided by the scanners.

Advanced Privacy

Much of the resistance towards security systems, such as those employed by the TSA in airports and terminals, is directed towards the intrusiveness of their nature. Privacy advocates and civil libertarians have raised concerns about some of the more prominent systems in places such as Dulles International Airport, where facial recognition scanners are in use.

“Right now, there is very little federal law that provides any type of protections or limitations with respect to the use of biometrics in general and the use of facial recognition in particular,” said Jeramie D. Scott, national security counsel for the Electronic Privacy Information Center in an interview with the Washington Post. Scott’s organization has filed Freedom of Information Act requests seeking details about the program.

Unlike visual recognition technology that is currently in use at many venues, the HEXWAVE^TM offers a much less intrusive solution.

This is achieved by several “game changing” advancements in the technology, which were developed at MIT Lincoln Labs and are exclusive to Liberty Defense Technologies.

Due to its unique antenna design and embedded computing power, HEXWAVE’s^TM  creates 3D images that are virtually analyzed in real time using an artificial intelligence architecture.. The system’s advanced antenna design provides the capability for the sensors to  be distributed in a way that is covert.  Further, the modular, self-contained design can be deployed across the entry paths of a venue thus enabling it to be scalable to the needs of a responsive security operation.

Personnel for Rollout

Beyond developing an effective technology, the challenge for stakeholders such as Liberty Defense Technologies is to get their system into as many venues as possible. Key to the company’s future successes are the people behind the scenes.

Bill Riker was brought on as CEO in August 2018, after a storied career with Smiths Detection, DRS Technologies, General Dynamics, and the US Department of Defense. COO and President of US Operations, Aman Bhardwaj compliments Riker’s security background, with a tech and manufacturing career that includes over 20 years of experience working with leading global teams for both major and startup companies, including Panasonic, Flextronics/Imerj, Educo and Hisense.

Riker and Bhardwaj are joined by a highly-qualified management team of leaders from the security industry, product development, government technology and manufacturing sectors. Assisting the management team is a highly experienced advisory board.

Notable among the advisory board is Francesco Aquilini, owner of the Vancouver Canucks NHL hockey team, and the team’s home, Rogers Arena which seats nearly 19,000 people. Aquilini also sits as the team’s main representative on the NHL Board of Governors, among a group that has at least 13 arenas privately owned by members of the board.

Aquilini is not the lone sports presence on the advisory board, as current President of Concacaf (the continental soccer governing body in North and Central America) Victor Montagliani is also advising the company.  As well, John May, former member of the Live Nation Canada management team, helped grow that event promotion company through to a successful joint venture with Maple Leaf Sports and Entertainment—owners of all the major professional sports teams in Toronto (NBA, NHL, MLB, MLS, CFL).

Meeting Demand

Liberty Defense has an exclusive license with MIT and a Technology Transfer Agreement with MIT Lincoln Laboratory for active millimeter imagining technology originally developed in the MIT Lincoln Laboratory for weapon detection.  They are continuing to support the effort through a cooperative research and development agreement for both the commercialization of the design and that includes other development to continue progressing the technology.

This capability was developed.   in response to the growing threat from terrorism, especially after a wave of subway and train attacks witnessed around the world in places like Madrid and London.  Prior to the HEXWAVE^TM innovation, it was practically impossible to develop security systems with existing technology for busy public spaces without grinding pedestrian traffic to a near halt.

The demand is there: According to a Homeland Security Research Corp. study, the global explosives and weapons systems market is projected to be more than $8 billion by 2020 and more than $11 billion by 2025.

Liberty Defense Technologies is targeting the urban security which generally consists of 4 vertical markets.   The market is segmented into four verticals that include public venues, secured perimeters and buildings, land transportation and a category called “other” that includes everything from schools through places of worship, hospitality fclities and even hospitals.  Thesehave been projected to reach $1.5-$2.0B in North America by 2020.

Projections for each component include: Public Venues ($283-$428M, CAGR to 8.8%); Secured Perimeters ($820M-$1.03B, CAGR to 4.7%); Land Transportation ($174-$257M, CAGR to 8.2%); Other/Schools/Hotels ($201-$228M, CAGR to 2.7%).

In late 2018, Liberty Defense Technologies secured a C$7 million fundraising, in order to commercialize the HEXWAVE^TM system.

“The response from the investment community has been overwhelmingly positive,” said Bill Riker, CEO of Liberty Defense. “There is real commitment to solve the issues surrounding public safety that have proliferated in recent years, and this detection system offers an innovative approach for this challenge with the HEXWAVE product.”

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